Overview

Uruguay stands out in Latin America for being an egalitarian society and for its high per capita income, low level of inequality and poverty and the almost complete absence of extreme poverty. In relative terms, its middle class is the largest in America, and represents 60% of its population. Uruguay occupies the top spots in the region in terms of various measures of well-being, such as the Human Development Index, the Human Opportunity Index and the Economic Freedom Index. Institutional stability and low levels of corruption are reflected in the high level of confidence that citizens have on the government. According to the World Bank’s Human Opportunity Index, Uruguay has managed to attain a high level of equality of opportunity in terms of access to basic services such as education, running water, electricity and sanitation.

In July of 2013, the World Bank placed Uruguay as a high-income country. By 2015, the national gross per capita income stood at US$15,720, according to the Atlas method. Two main characteristics —a solid social contract and economic openness— paved the way to the reduction in poverty and the promotion of shared prosperity that Uruguay successfully followed in the last decade.

With an annual average growth rate of 4.8% between 2006 and 2015, Uruguay’s robust economic performance has given it a greater economic resilience to external shocks.

Moderate poverty went from 32.5% in 2006 to 9.7% in 2015, while extreme poverty has practically disappeared: it went down from 2.5% to 0.3% in the same period. In terms of equity, income levels among the poorest 40% of the Uruguayan population increased much faster that the average growth rate of income levels for the entire population.  Inclusive social policies have focused on expanding program coverage; for example, around 87% of the over-65 population is covered by the pension system: this is one of the highest coefficients in Latin America and the Caribbean alongside Argentina and Brazil.

Its robust macroeconomic performance was also reflected in the labor market, which registered historically low unemployment levels in 2014 (6.6%), although in view of a marked slowdown in growth, the latter has increased to 8.6% in July of 2016. Concerning export markets, these have been diversified with the aim of reducing the country’s dependency on its main trade partners; currently, 77% of exports go to 15 different destinations.

Uruguay continues to maintain an adequate macroeconomic framework although in a much more complicated external environment.

For more data on Uruguay, visit the World Bank’s Open Data site.

 

Last Updated: Sep 27, 2016

The World Bank Group (WBG) has backed Uruguay’s development process for more than 60 years, through a variety of instruments including loans, insurance, donations, technical assistance and knowledge exchange.

Uruguay has the highest income among WBG active borrowers, and, in particular, demands:

  • the development of finance services and innovative knowledge to provide solutions based on the WBG’s experience in other countries;
  • the use of integrated services with the participation of the World Bank, the International Finance Corporation (IFC) and the Multilateral Investment Guarantee Agency (MIGA); and
  • the publication of Uruguayan development experiences in web sites where the WBG can serve as a platform for the dissemination of successful reforms. 

In a similar vein, the WBG has a great interest in continuing work with a client such as Uruguay, with the intention of:

  • collaborating with a country that has chosen a development model focused on increasing productivity and its insertion in the international sphere, one where equitable growth and the support for the poorest 40% of the population constitute fundamental values; and 
  • an association in search of innovative development solutions to assist the country and create positive externalities in the area of knowledge that can be leveraged by other WBG clients in Latin America and other regions.

The work program for the 2015-2020 is structured around three pillars:

· Generate resilience to economic vulnerability and climate change

· Back government efforts to redirect the social contract towards the young

· Encourage a greater integration of Uruguay in the global economy       

The World Bank Group (comprised of three institution: IBRD, IFC and MIGA) has a portfolio of 13 projects in Uruguay totaling around US$1.5 billion. The IBRD currently has eight active operations, four of which are investment projects totaling US$153 million, a Results-Based Project (P4R) for road construction and maintenance worth US$66 million, and a US$200 million deferred-drawdown option (DDO) investment loan that kicks in should the country find itself in an adverse climatic situation. There are also two projects worth US$260 million, each corresponding to development policy loans, commonly known as contingent lines, which are yet to be disbursed. It is worth pointing out that this contingent financing played an important role in improving the credit rating of the country, which obtained the Investment Grade early in 2012.

The participation of the IFC is currently focused on priority areas such as infrastructure (barge transport, renewable energy), the financial sector and agro-industry (food production), with small and medium sized companies (SMEs) as a crosscutting support pillar. The IFC’s current portfolio in Uruguay numbers four projects valued at approximately US$129 million. For its part, MIGA has recently issued a US$439 million guarantee for the Uruguayan subsidiary of Banco Santander.

Furthermore, its project portfolio is complemented with non-reimbursable technical assistance donations and studies such as water resource management in Uruguay, demographic changes, an analysis on grain-export logistics chains and green growth, among others.

Last Updated: Sep 27, 2016

The World Bank Group has worked alongside different Uruguayan governments in areas such as infrastructure, transport, agriculture, natural resources, education, sanitation and health. Translated into results this means, for example, 12,300 new water connections in 12 cities, three water treatment plants in Minas, Treinta y Tres and Durazno, supplying 60,000 people; 5,300 Uruguayan producers with better productive capacities, among others.

Since 2010, more than US$1 billion have been approved in loans aimed at financing investment in infrastructure, agriculture, environment and institutional strengthening, and to increase the Government’s capacity to protect the most vulnerable sectors of the population from external economic shocks via contingent financing.

Moreover, the World Bank has provided analytical and technical support to consolidate reforms aimed at increasing public spending efficiency, expand coverage and improve the selectivity of social programs, as well as increasing the country’s financial inclusion.

The successful results of these projects reflects the World Bank’s work in various sectors:

  • Climate Insurance: Various countries have approached the World Bank in search of a solution similar to the one implemented with the Uruguayan government. In December 2013, the World Bank signed a contract with energy company (UTE) that provided coverage against the combined risks of drought and high oil prices over the ensuing 18 months. That transaction was designed to help the company compensate for any financial loss occurring from a lack of rain reducing the volume of water in the reservoirs that feed its electricity plants, forcing it to resort to thermal generation, which has a higher cost and demands the importation of alternative fuels.
  • Responsible Production Project. Since 2005, it has strived to stimulate small and medium sized Uruguayan producers to adopt economically and environmentally sustainable production systems, technical improvements in soil management, water and biological diversity, contributing to the long-term sustainability of agricultural production in the country. It did this by channeling financial resources and technical assistance to individual producers or groups, interested in carrying out projects in their properties. The project financed 5,300 property sub-projects throughout the country, 86% of which belonged to small producers. Some 28,000 people benefited directly, while 600 technicians were trained in sustainable development and comprehensive natural resource management. Additionally, the project managed to coordinate more than 160 institutions.
  • Programmatic Reform Implementation Development Policy Loan. It supported the government’s program, providing an additional line of financing to confront the effects of the international economic crisis, particularly by reinforcing social protection systems. It was the first time the World Bank issued a local-currency bond in relation to the consecutive disbursement of a concrete loan. It was also innovative in the sense that the Bank was the first foreign issuer of a public bond in Uruguayan pesos, which reduced financing costs and increased the diversification of public debt and pension fund portfolios.
  • The Foot and Mouth Disease Eradication Emergency Project aided Uruguay in reaching a foot and mouth disease free status following the 2001 outbreak, recovering access to markets and, because of this, contributing to the continuing profitability of its producers. Some 50,000 producers benefited from this project. Furthermore, and as a way to avoid similar situations, the World Bank supported the development of a National Livestock Information System (SNIG), which allowed Uruguay to become the only country in the Americas, and one of the few in the world, with 100% traceability of individual cattle. Currently, Uruguay’s Ministry of Agriculture, with the support of the World Bank, has taken a further step in the development of agricultural technologies, developing a National Agricultural Information System (SNIA), an online platform that consolidates data such as weather forecasts as well as early warnings, among others. Although the SNIA is still not available to the public in general, the databases that have already been produced are already helping agricultural and livestock producers mitigate weather phenomena on their production. See related article.

Last Updated: Sep 27, 2016


LENDING

Uruguay: Commitments by Fiscal Year (in millions of dollars)*

*Amounts include IBRD and IDA commitments